US Stocks Flat; Banks Weak But Defensive Stocks Up

RobCurran

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NEW YORK (MarketWatch) -- U.S. stocks finished more or less flat Wednesday as strength in defensive stocks like Wal-Mart Stores and Procter & Gamble compensated for a slide in distressed stocks like General Motors, Citigroup and Bank of America, which neared their bear-market lows.

Bank of America fell 33 cents, or 6.7%, to 4.57, within 80 cents of its low before the government threw it a lifeline in January. Citigroup fell 15 cents, or 4.9%, to 2.91, 11 cents above its bear-market nadir. Citi has lost 26% in a six-session period.

Former Federal Reserve Chairman Alan Greenspan said temporary nationalization of banks could be necessary as the "least bad" solution to the seemingly intractable banking crisis.

Traders brought the Dow Jones Industrial Average back from the brink again, closing up 3.03 points, or 0.04%, at 7555.63, within four points of its lowest close in five-and-a-half years for the second session in a row. The Dow traded as low as 7480, which would have been its lowest close since Oct. 9, 2002, the deepest mark of the last bear market.

The Standard & Poor's 500 closed down 0.75, or 0.1%, to 788.42, its lowest finish since ending at 752 on Nov. 20, which was a roughly 10-year low. The Nasdaq Composite fell 2.69 points, or 0.18%, to 1467.97, its lowest close since January.

Market technicians are divided on whether the bear-market lows are about to break in a cascading selloff, or whether recent action is a repeat of the "wallowing" pattern that occurred around the lows of the last bear market in 2002 and late 2003.

Carter Worth, chief market technician at Oppenheimer, believes the "cathartic" selling of September and October is over. He says the intraday swings recently are much tamer and volume much lighter because traders have backed away from stocks altogether.

"Basically the market's fair money, dead money, it just needs to wallow," Worth said. "We're in the apathy phase. All the long-only money is holding back and is in maximum cash. That's apathetic behavior. At the hedge fund level, they have their margin and leverage reduced to record lows. That's apathetic behavior."

Richard Dickson, market strategist at Lowry Research in Florida, said there should be a rebound rally soon, if the November lows are to remain intact.

"A failure of demand to develop would suggest the market is vulnerable to another leg lower in the still-ongoing bear market," Dickson said, in a note to clients.

General Motors fell 12 cents, or 5.5%, to 2.06 after the auto giant and its privately held rival Chrysler appealed to the government for $21.6 billion in additional aid. Standard & Poor's Ratings Service said risks of bankruptcy remain high for both companies through next year.

President Barack Obama's plan to help seven million to nine million mortgage holders in danger of foreclosure barely caused a ripple, reflecting the dire straits in the U.S. housing market. Housing starts fell 17% to 466,000 in January, according to the U.S. Commerce Department. In minutes from the recent Federal Reserve meeting that were released at 2 p.m. EST, investors learned the central bank had reduced its growth outlook for 2009 and 2010 and saw no signs of stabilization in the housing market. The Fed said that "strains in financial markets would ebb only slowly, and hence that the pace of recovery in 2010 would be damped."

Shares of hotel chains fell after a research firm said revenue per available room fell about 16% in U.S. hotels for the week ended Feb. 14. In luxury hotels, the key metric fell by 29%.

Agilent Technologies fell 1.60, or 9.1%, to 16.05. The maker of machines for DNA and chemical analysis and other purposes said it would cut 600 jobs after fiscal first-quarter earnings and sales were crimped by the recession.

Shares of Dow component Hewlett-Packard shed 26 cents, or 0.8%, to 34.08. Shares slid further in after-hours trading as adverse foreign-exchange rates hurt the computer maker's revenue. H-P also warned that it expects a 2% to 5% decline in fiscal 2009 revenue.

Many large airline stocks fell after an industry report showed "premium" resort travel has ground to a halt for carriers.

For December, travelers flying on the world's airlines bought 13.3% fewer premium tickets compared with a year earlier, led by a sharp decrease in travel to Asia, according to a new report from the International Air Transport Association.

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